2 Compensation system
2.1 Articles of association provisions
Art. 30 to 33 of the articles of association of Allreal Holding AG govern the principles of remuneration. They provide that the Board of Directors and Group Management may, in addition to a fixed remuneration, also receive results-based and performance-based compensation as well as equity securities or convertible and warrant bonds. Variable remuneration will be dependent on performance targets.
In the case of members of Group Management appointed after the total fixed remuneration for the current year has been approved by the annual general meeting, an additional amount of a maximum of 20% of the fixed total remuneration paid to the respective predecessor is available. This additional amount may not, however, exceed 50% of the approved total remuneration for Group Management.
The articles of association do not contain any special rules regarding loans, credits and pension benefits granted to members of the Board of Directors and Group Management. The exact wording (in German only) of the articles of association can be accessed on the Allreal website: www.allreal.ch/nc/investoren/corporate-governance/statutenprotokolle
2.2 Remuneration paid to the members of the Board of Directors
The members of the Board of Directors receive fixed remuneration, which is paid out in cash after the annual general meeting has approved the annual financial statements.
The remuneration takes account of the claims made on the individual members and their responsibilities and is not tied to company targets.
It is regularly compared against the remuneration paid to the members of the Boards of Directors of listed competitors from the real estate sector and presented annually to the annual general meeting for approval at the latter’s discretion. No further remuneration is paid to the Board of Directors.
2.3 Remuneration paid to the members of Group Management
In addition to their fixed basic salary (including fringe benefits and employer’s contributions to the management pension plan), members of Group Management also receive variable remuneration (target bonus), which is paid out in cash and is based on the company’s annual result (performance bonus) and the attainment of individual targets (function bonus). Over and above this, members of Group Management also receive variable remuneration in the form of share allocations geared to the company’s long-term performance.
Fixed basic salary
The amount of the fixed basic salary in cash is dependent on the individuals’ tasks and responsibilities, on their experience and on their proven track record. The basic salary is determined on joining the company or on being appointed to Group Management and is based on salary levels in the Swiss real estate sector. To this end, regular comparisons are made against listed competitors and reviewed annually by the Nomination and Compensation Committee.
The amount of the target bonus, consisting of the performance and function bonuses, is set by the Board of Directors annually.
The performance bonus is based on the budgeted net operating profit (net profit excluding revaluation effect). If the budget is achieved, the performance bonus will be paid out the following year once the annual financial statements have been approved by the annual general meeting. It will amount to a maximum of 25% of the basic salary per member of Group Management. If the net operating profit falls short of the budget by 10 or more percent, no performance bonus will be paid out. If the net operating profit is 10 or more percent above budget, 150% of the agreed performance bonus will be paid out. The performance bonus for a net operating profit which is less than 10% above or below budget will be calculated on a linear basis.
With net profit excl. revaluation effect at CHF 113.3 million, the result was 5.2% better than budgeted (2016: +3.2%).
The function bonus is dependent on the performance of the member of Group Management in his area of responsibility and functions and hence on individual target attainment. The function bonus may make up a maximum of 40% of the target bonus and will amount to a maximum of 15% of the basic salary per member of Group Management. If the individual targets are not achieved, no bonus will be paid out.
In the 2017 financial year, the average individual target attainment for Group Management as a whole amounted to approximately 79% (2016: 72%).
Remuneration in shares
In addition to the variable target bonus, members of Group Management may be awarded a variable remuneration component in the form of shares. The stock exchange value of the registered allocated shares of Allreal Holding AG must not exceed 10% of the individual’s fixed basic salary for the year in question. The effective amount of the remuneration awarded in shares is set annually at the discretion of the Board of Directors. Bonus recipients will be able to access half of the allocated shares immediately and the remainder in two years’ time, provided their position is not under notice of termination.
If the budget is achieved, the variable remuneration shall, in principle, make up no more than 40% of the basic salary per member of Group Management.